The Energy Report for Friday, November 18th 2011

Phil Flynn 800-935-6487 email pflynn@pfgbest.com

So Much For One Hundred Dollars Per Barrel

Much was made of WTI crude oil passing the 100.00 mark and many thought that if we closed above $100 a barrel we would be in some type of new era for oil. Well that era is now over and lasted only a day as European debt fears, as well as the realization that the reversal of the seaway pipeline ultimately is more bearish then bullish. A terrible Italian and now Spanish debt auction stirred fears that the Euro zone credit woes are expanding. Lack of confidence in the EU is causing buyers of Eurozone debt to command post EU record highs. Fear of a EU meltdown is overshadowing the fact that in the US our economy is starting to recover. More evidence yesterday came with a strong jobless claims number, retail sales, housing starts as well as other data that seems to suggest we are starting to move. The dollar and bond rallied in a safe haven bid and commodities started to tumble.

Get ready to party! Natural Gas supply hit a record high! The Energy Information Agency reported working gas in storage was 3,850 Bcf as of Friday, November 11, 2011. This represents a net increase of 19 bcf from the previous week. Stocks were 14 bcf higher than last year at this time and 224 bcf above the 5-year average of 3,626 bcf. In the East region, stocks were 58 bcf above the 5-year average following net injections of 9 bcf. Stocks in the producing region were 148 bcf above the 5-year average of 1,098 bcf after a net injection of 11 bcf. Stocks in the West region were 18 bcf above the 5-year average after a net drawdown of 1 bcf. At 3,850 bcf, total working gas is above the 5-year historical range. Now the question is whether or not we will end the winter at a record.

Reuters News reports, "U.S. natural gas inventories should end winter at a 21-year peak after starting the heating season at an all-time high for a third straight year, creating a buffer for consumers over the summer, according to a Reuters poll of traders and analysts. Without winter temperatures that come close to matching last year's severe cold, brimming inventories next spring could spell more trouble for prices, which hit a two-year low this week of $3.11 per mm Btu despite the fast approaching peak heating demand season. The Reuters storage poll put the consensus forecast for end-winter inventories at 1.864 trillion cubic feet, nearly 300 billion cubic feet, or 19 percent, above average and the highest since 1991 when stocks in late March stood at 1.912 tcf. Such high inventories at the start of the spring and summer stock building season give utilities more bargaining power when rebuilding supplies for next winter, and can help lower power costs for consumers during summer when prices can go up as air conditioners come on."

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Phil Flynn
Research Division
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Chicago, IL 60634
312 563-8344 / 800 935 6487